Monday, January 12, 2015

The Hidden Perils of Low Interest Rates

Late last year, with the U.S. economy experiencing
falling unemployment and seemingly low inflation, observers were
extremely confident that the Federal Reserve would move judiciously in
2015 to restore 'normal' interest rates sooner rather than later.
However, in light of the recent fall in both stocks and oil, that
conviction has softened considerably.

Many, such as the
very influential Bill Gross, now believe that our current Zero Interest
Rate Policy (ZIRP), which has been in place for six years, will remain
in place throughout the year. While this likelihood is a
disappointment to many, who would have preferred to see the economy
move along without Fed-supplied training wheels, few really understand
the pernicious effects these policies are inflicting on the economy the
longer they are held in place. In short, ZIRP is slowly transforming
the world economy into a dysfunctional basket case.

Historically,
it has been estimated that a 'normal' fair rate of return on short to
medium-term high quality debt is between 2 and 2.5 percent, net of
inflation. Recently, the Fed published year-on-year U.S. CPI inflation
for mid November 2014 at 1.3 percent. This would suggest normal
short-term rates at around 3.5 percent at present.

However,
using the government's methodology that was in place prior to 1990,
John Williams' Shadow Government Statistics (SGS) newsletter calculates
inflation to be currently some 5 percent. Using methods in place prior
to 1980, it is a staggering 9 percent. At that level, current interest
rates should be somewhere around 11.0%. Even if we estimate that real
inflation is currently 3%, then our "normal" rate of interest should be
around 5%. This is some 50 times the rate paid currently on most bank
deposits. This gap is distorting the economy in untold ways.

In
early December 2014, the U.S. Congress approved further Government
spending of some $1.1 trillion. This came just as the U.S. Treasury's
debt broke through a total of $18 trillion. It wasn't that many months
ago that the $17 trillion barrier was first breached.

Currently,
the U.S. Treasury can borrow for 10 years at around a rate of 2
percent. But if long term rates rose to 5 percent, which would be in
line with the historic range of "normal," the 3 percent difference
would cost the Treasury an additional $540 billion in annual interest
payments (based on the current $18 trillion in debt). This would
considerably undermine the government's fiscal position, and
necessitate an upheaval in federal budgeting.

The financial
repercussions of a tripling or quadrupling of interest rates truly are
horrific. They lead to a sense of foreboding that the Fed, aware
acutely that the U.S. Treasury simply cannot afford a return to normal
interest rates, will not restore normal rates unless forced to do so by
international bond or currency markets. It appears, therefore, likely
that ZIRP will continue for years to come. This feeling is underpinned
by a view that low interest rates are simply a benign stimulant that
fails to appreciate the actual harm they impose, particularly in the
fixed income markets.

Savings are the prime source of real
long-term investment. Today, savers are being crushed by the Fed's
manipulation of interest rates to below a real return. To find even
small real returns, investors have had to scour the financial landscape
for sources of yield. In doing so, they have ventured into risky
territory and have, for instance, flooded into the high yield market,
pushing junk yields to record low territory. The repercussions of
providing excess capital to risky businesses have yet to be
experienced, but the energy industry should provide us with a hint of
things to come. Over the last few years small and midsized energy firms
were able to borrow cheaply and lavishly to fund drilling projects,
thereby greatly increasing production. But in retrospect, these efforts
look like they helped create an oversupply of energy that has
depressed the price of crude and has exposed the energy sector to
long-term financial stress. Bankruptcies and creditor losses may be
inevitable.

Another concern of the Fed is that despite an
unprecedented increase in liquidity and part-time employment, real job
creation is still sluggish at best. Furthermore, the Manhattan
Institute's Power & Growth Initiative Report of February
2014notesthat the U.S. oil and gas boom has created some one million
jobs with a further ten million in associated occupations. The oil boom
has improved net employment and kept the economy out of recession. But
oil prices have fallen dramatically, threatening these economic
bonuses and high-yield bond defaults. It's hard to see what other
distortions and hidden pitfalls have been created by negative real
rates. The traps often become visible only after they have been sprung.

But with major economies such as the European Union, Japan
and Russia flirting with recession (and China slowing down
considerably), there is growing fear that normal interest rates would
be dangerous at present. This fear likely will encourage the maintenance
of ZIRP, possibly for years, with financial markets disconnected
increasingly from the real economy.

Therefore, investors may
continue to benefit for some time from the consistent boosting of
financial markets by central banks. However, the longer a major
correction or even a crash takes to develop, the more sudden, deep and
devastating it may be.

There
are many references to the death penalty for blasphemy. Here is an
excellent SAHIH hadith in which Muhammad approves of a man killing the
mother of his children for making fun of Muhammad. Thanks to David Wood for this:

Sunan Abu Dawud 4361 (Muhammad on Killing Critics of Islam)

Here’s Sunan Abu Dawud 4361 (4348 in some editions), in English and Arabic, along with the rating (sahih).
In this hadith, a man kills the mother of his children for speaking
against Muhammad. Muhammad, in response, says that no one is to punish
the man.

So when Muhammad’s own companions killed critics of Islam, and
Muhammad approved, why do politicians, the media, and Muslim groups keep
insisting that killing critics has nothing to do with...

It’s
an all-out war to destroy the freedom of speech and impose Islam’s
blasphemy law restricting negative speech about Islam. And most of the
Western media has already surrendered and submitted to this violent
intimidation by refusing to run the cartoons.

A German newspaper in the northern city of Hamburg that
reprinted Prophet Muhammad cartoons from French paper Charlie Hebdo has
been the target of an apparent arson attack. Authorities said no one was
injured.

Police said “rocks and then a burning object” were thrown through
rear court-yard windows into archive rooms of Hamburg’s daily newspaper,
the Hamburger Morgenpost around 0200 a.m. local time (0100 UTC).

Two people seen acting suspiciously in the area had been taken into
custody, as authorities investigated further, police added, refusing to
give more information about those detained.

The investigation had been handed to Hamburg city state’s protection service.

Hebdo massacre connection?

The Hamburger Morgenpost had printed three Charlie Hebdo cartoons
following last Wednesday’s massacre in Paris. The Morgenpost headline on
Thursday had read, “this much freedom must be possible.”…

Islamic State (ISIS) claims to have hacked CENTCOM Twitter account

Bare Naked Islam

As Barack Hussein Obama ran his mouth
to the nation regarding national cyber security efforts, hackers
claiming to represent the Islamic State (ISIS) took over the Twitter
account of the Pentagon division in charge of the Middle East.

Free Beacon Hackers with the Islamic State, also known as ISIS, posted links on U.S. Central Command’s official Twitter page to what it claimed was “confidential data from your mobile devices.”

“ISIS is already here, we are in your
PCs, in each military base. With Allah’s permission we are in CENTCOM
now,” said one tweet sent from CENTCOM’s account.

The apparent hack came as President
Obama addressed the nation regarding cyber security. He is expected to
propose two pieces of cyber security legislation and to address the
effort in his upcoming State of the Union address.

The hackers subsequently tweeted
images of spreadsheets containing the home addresses, phone numbers, and
email addresses of dozens of current and former senior U.S. military
officers.

“AMERICAN SOLDIERS, WE ARE COMING WATCH YOUR BACK,” one tweet stated.

Hackers appear to have also compromised CENTCOM’s official YouTube page, where they posted a pair of IS propaganda videos.

Op-ed:Enough...We've Had Enough...Part 1 of 3By: Diane Sori“Islam is as dangerous in a man as rabies in a dog.”
Sir Winston Churchill

And so they came to Paris...

One by one from all over France they gathered to stand strong and
united as one against terrorism...against muslim islamic terrorism.

And they came...one and a
half million French men, women, and children marching through the
streets of Paris (3.7 million marched across all of France)...NOT for a funeral or memorial service per se, but for a
quiet and respectful act of protest and show of solidarity against the
out of control political ideology known as islam. The world's great leaders...over 50 in fact... including Britain's
Prime Minister David Cameron, Germany's Chancellor Angela Merkel, and
Israel's Prime Minister Benjamin Netanyahu (the man who warned the world
time and again about the dangers of islam)...stood alongside French
President Francois Hollande. Joined by Russian Foreign Minister Sergei
Lavrov and Turkish Prime Minister Ahmet Davutoglu, they all linked arms
to march together as one to show the world they stood united with the people of
France...to show the world they stood united against islamic terrorism.

Even Mahmood Abbas...for Palestinian political expediency alone...and
the King and Queen of Jordan...again to serve their own purposes...were
there but most noticeably absent was American President Barack HUSSEIN
Obama...the 'supposed' leader of the free world.

What a slap in the face and insult to NOT only the 17 murdered, but to the
French people and to the other leaders of the, for now, still free
world. Obama's NOT going sent a powerful message to the world of his renunciation of leadership in the 'War on Terror' and his condoning of, or in the very least his looking away from, on-going islamic terrorism. And know this snub will rightfully NOT be forgotten nor forgiven. (Article continues below video.)

And as they gathered in a cry for freedom from a nightmare of their
own doing for France, like the other nations of Europe, has allowed this
islamic nightmare to unfold because of their lax immigration laws. And
that laxness along with their placating and appeasing these people...as in the
muslims...has brought France and all of Europe to the point they are at
today.

And while on Sunday they marched 'over there' here in America...an
America burdened with its own immigration problems...this administration
continues to purge the word islam...continues to purge the word
muslim...from major U.S. government and military documents...and does so
in the name of political correctness for this most miserable of presidents dares NOT step on his
brethren's toes. And so Barack HUSSEIN Obama willingly looks away to the
reality of the horrors being done by those whose blood also courses through
his veins.

What happened in France yesterday should be happening in DC and in
cities all across America today...protests drawing hundreds of thousands if
NOT millions...for only in numbers...in visual tangible numbers...can
change for the better be initiated...and only in numbers can the pen and
the phone be removed from the hand of a vile and dangerous man run
amok.

And while the unofficial slogan of Sunday’s rally could be seen on a
large balloon flying over the marchers, “Je suis Charlie, flic,
juif”...“I am Charlie, a cop, a Jew” (the hostages targeted and killed were all
French Jews)...Prime Minister Benjamin Netanyahu rightfully took a front
row position in the march of world leaders and did so just as French
law enforcement officers were told to erase their social media presence
and to carry their weapons at all times because word reached
French government officials that terror sleeper cells have been activated
throughout France over the last 24-hours. And this in turn led to 90,000 French army
soldiers being deployed to search for possible attackers.

And yet some NO matter this warning...NO matter this French military
deployment ...NO matter the horrific events at Charlie Hebdo...many in the West
still believe that we are NOT at war with islam but only at war with
radical islam. And to that I say it's way passed time that people
wake-up to the reality and accept as fact that we indeed are at war with
islam...the one and only entity known as islam...and that we have been
since a sunny day back in September of 2001.

So as we in the West continue to fight the on-going 'War on Terror,'
remember that there is NO real strategy in place to win that war, and
this alone has allowed the islamists the ability to grow stronger and
bolder in the methodology they use to achieve their goal of establishing
a worldwide caliphate ruled by sharia law. And we in the non-muslim
world need to understand...to really understand and accept as
truth...that when muslims say they will do 'something' to avenge what
they perceive as the West's dishonoring of their prophet muhammed...and
know that threats against we infidels are made on a daily basis...they
will indeed do it. And know that the days of saying that NOT all muslims
are terrorists is over for if you do NOT condemn you do indeed
condone...and when was the last time you heard muslim voices uniting in
loud and clear condemnation of acts of jihad...of act of terrorism.

The simple fact is you have NOT except for a lone voice here and
there. But now one of those lone voices...and a very powerful voice...has
broken that silence as just mere weeks agowhile speaking before islamic authorities from the Awqaf Ministry and Al Azhar University as they celebrated the birth of islam’s prophet muhammed,Egyptian
President Abdel Fattah al-Sisi, a practicing muslim, spoke the truth about the islamic
world’s relationship with the rest of the world. Daring to say that
islam needs reformation if it is to continue to exist in today's 21st
century world, al-Sisi spoke these words knowing that many political
leaders here in the West still believe that islamic terrorism is anything but a representation of islam itself. Yet al-Sisi knows the
truth that the two are indeed one and the same for he knows well that
it's many of the words within the qur'an itself, along with its many
out-dated ideas, that muslims hold sacred... that muslims have
ritualized with unyielding unbending devotion...that are arousing NOT only the rightful ire of the
Western world, but are arousing the rightful ire of any and all those NOT in the muslim world as well.

“It’s inconceivable that the thinking that we hold most sacred should
cause the entire umma [Islamic world] to be a source of anxiety,
danger, killing and destruction for the rest of the world.
Impossible!,” al-Sisi said.

And he said these words bravely knowing that he had just put his life in danger at the hands of the very people he speaks of.

And as the march itself drew down, Prime Minister Benjamin Netanyahu
and French President Francois Hollande were welcomed with loud cheers as
they entered the Grand Synagogue in Paris (the largest synagogue in all
of France) for the official ceremony honoring “all the victims”
slaughtered at the hand of islamic savages.“Israel will live, Israel
will overcome” those gathered chanted for they know that the muslim
world's hatred of Israel is at the bottom of this all. Calling out
Netanyahu’s nickname “Bibi” time and again and bursting into loud
applause as he announced that the four Jewish hostages murdered in the kosher grocery store would be laid to rest in Israel, Netanyahu expressed his appreciation to
France for taking a strong stance against both anti-Semitism and
terrorismall while recognizing the“renewed struggle against the Islamic terrorism that is threatening all of humanity.”

And so it became obvious to all watching these events unfold live on their TVs
that for at least one night all in that synagogue were Jewish in their
hearts...were Jewish in their soul...putting aside the sad reality of
growing anti-Semitism spreading throughout Europe...anti-Semitism
reignited by the growing influx of muslims entering the nations of
Europe.

But some good could come from last week's horrific
events as maybe now Europe will close their borders to this muslim invasion
and start deporting many of those currently there...maybe now Europe will
realize that it's NOT the Jews but the muslims who are the enemies of their culture...maybe
Europe will now start to understand that it is Israel who might be the one
to save them for Obama's absence at yesterday's events shows that as
long as he is America's president he will NOT lead the world in a true
war against his blood brethren...blood brethren out to kill us all.

So now with a warning having been issued I hope the world, and especially
America, takes notice that events like what happened in Paris will
happen again and again, and that 'We the People' truly understand that the world's great oceans will NO long
insulate us from events such as this. And since Obama will NOT protect
us it becomes even more critical that these islamic bastards know...that
Barack HUSSEIN Obama know...that behind every blade of grass...and you
dear reader all know exactly what I mean.

May the 17 murdered at the hands of islamic savages forever Rest in
Peace knowing that maybe their deaths will be the catalyst for people
waking up to the fact that the enemy known as islam...just like a cancer
growing within a body...must be totally eradicated in order for the
civilized world to survive.

In tomorrow's part 2 of this 3-part series, my RIGHT SIDE PATRIOTS partner and friend Craig Andersen will address the specifics of islamic terrorism and its ramifications.

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I am an American Patriot...part of the grassroots movement of bloggers spreading the truth the media will not. I am also co-host with Craig Andresen of RIGHT SIDE PATRIOTS on RSP Radio at: https://streamingv2.shoutcast.com/right-side-patriots